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Fashion Faux Pas? Free Trade and Sweatshop Labor in Guatemala

Free trade agreements have not delivered promised protections to workers, as the case of Guatemalan sweatshop labor illustrates.

Juana, a 37-year-old single mother of two teenage sons, worked at a sweatshop in Guatemala that supplied clothes to more than 60 US retailers for four years.

“It was just enough to survive,” said Juana of the $1.05 hourly base wage she received at the factory. “When they paid for extra hours, one could get more resources. But it is not enough for education, housing, health, food and clothing. One does not live well with that wage. You need someone else in the family to be working, too.”

She is one of more than 1,000 mostly indigenous Mayan workers who were exploited and robbed at the Alianza Fashion Factory in the Department of Chimaltenango making garments for brands such as Macy’s, Walmart, JCPenney and Kohl’s. A worker such as Juana would have to work for more than 9,776 years to earn the $33.7 million JCPenney CEO Myron E. Ullman III made in 2012. JCPenney was Alianza’s top client in 2011.

A report published in January by the Institute for Global Labour and Human Rights and the Center for Studies and Support for Local Development (CEADEL) offers a detailed case study of the corruption, abuse and shameless profiteering that often exemplify the global supply chain, demonstrating that globalization and “free trade” do not “lift all boats” but instead build more yachts for the 1%.

“Over the last 12 years, the Alianza workers were robbed of over $6 million in wages and benefits due them, most significantly health and pension benefits through the Guatemalan Social Security Institute (IGSS),” the report states.

During those 12 years, the report estimates that more than 52 million garments were produced for export. Retailers have marked up the price from the cost of production of items as much as 550 percent.

Bong Choon Park Seo, the South Korean owner of the factory, closed Alianza in March 2013 and is being sought by the Guatemalan government, although critics question how resolutely. In the 12 years that Park owned the factory he changed its legal name four times to avoid taxes and pocket the millions of dollars of stolen wages.Juana found another job in the beginning of January, working at another maquila (sweatshop) and earning the equivalent of $64 for her work week of six 11-hour days.

“It is very sad because with the closing of the factory, we have lost an income. The factory was close to our house; we also lost friends. … But above all, we lost part of our life because they did not make our Social Security payments,” Juana said.

The Institute’s Charles Kernaghan, who co-authored the report, called the whole ordeal a disgrace. He said that historically, the labels claim ignorance, although even if that is the case, he thinks it’s intentional.

“The situation now is that the labels have no responsibility whatsoever,” Kernaghan said.

Free Trade for the 1%

Juana’s predicament is just one of millions of appalling stories hidden behind the labels of the clothes people wear in the United States. It is also emblematic of the empty promises associated with how free trade agreements supposedly improve the lives of workers.

One such trade agreement is the Central American Free Trade Agreement (CAFTA), which Guatemala signed with the United States in 2004 and which went into effect in 2006.

The ratification of the largely unpopular trade agreement by the Guatemalan government in March 2005 was met with protests – and the protests were met with violence resulting in the deaths of at least two people and dozens injured. According to Amnesty International, two journalists also received death threats at the time in an apparent effort to stop them from reporting about the excessive violence and abuses by Guatemalan military and police forces responding to demonstrations by civil society members who argued that the trade agreement would “destroy their livelihoods.” According to Celeste Drake, Trade and Globalization Policy Specialist with the AFL-CIO, they were right.

“In several CAFTA countries things are worse now than when CAFTA went into effect,” Drake said.

CAFTA’s impacts should come as no surprise. The treaty was modeled after the much-maligned North American Free Trade Agreement (NAFTA), signed 20 years ago with Canada and Mexico. The Center for Economic and Policy Research (CEPR) released a report – “Did NAFTA Help Mexico? An Assessment After 20 Years” – this month that concluded: not really. The poverty rate in Mexico is virtually the same as 20 years ago, real wages (adjusted for inflation) increased by only 2.3 percent, while unemployment also increased.

“Mexico did all the things that Washington wanted and was supposed to be the big winner from NAFTA,” stated CEPR co-director and lead author of the report Mark Weisbrot in a press release. “But after 20 years, it’s pretty clear that although some billionaires did remarkably well, the Mexican people lost. There should be more discussion of what went wrong, especially in light of the proposed Trans-Pacific Partnership Agreement, which is modeled on NAFTA.”

Both trade agreements lack meaningful and enforceable labor rights provisions, and what provisions there are aren’t being protected or improved. In April 2008 the AFL-CIO, along with six Guatemalan unions, filed a CAFTA complaint alleging that the Guatemalan government wasn’t enforcing its own labor laws, as mandated under the trade agreement, and wasn’t properly investigating and prosecuting crimes against trade unionists. The labor laws are related to freedom of association, the right to organize and bargain collectively, and acceptable working conditions – which are protected under Guatemala’s Constitution and Labor Code. The AFL-CIO complaint mentions, among other specific violations:

– Failure to bargain in good faith, in violation of Article 51 of the Labor Code (court failed to act).

– Dismissal of union officers, in violation of Articles 379-80 of the Labor Code (government failed to act).

– Obstructing freedom of association, in violation of Article 102(r) of the Constitution and Article 10 of the Labor Code.

As a result, workers’ rights to freedom of association and collective bargaining have not been upheld or protected. The Department of Labor, in response to the AFL-CIO’s complaint, issued a report in January 2009 confirming that the Guatemalan government wasn’t enforcing its own labor laws and made a set of recommendations to fix the problems. Nothing changed as a result, as workers at the Alianza factory can attest.

The Alianza report noted that on March 24, 2010, 34 workers founded a “Coalition of Workers,” a precursor to organizing a union. In theory, this is protected by Guatemalan law under Articles 379 and 380 of the Guatemalan Labor Code, which, according to the labor chapter in CAFTA, the Guatemalan government is required to uphold. In reality, during the next two days, 60 workers were fired for union activity. In June 2010, after it became apparent that the Guatemalan government was doing little, if not nothing, to uphold its labor commitments under CAFTA, Washington took the next step – consultations with the Guatemalan government. It wasn’t until the threat of an arbitration panel in August 2011 that both sides agreed to negotiate a comprehensive Enforcement Plan, “with concrete and measurable benchmarks and timelines for their implementation,” which was finally agreed upon in April 2013. Progress on the plan would be monitored over a six-month period.

“Those who file labor complaints really just have to wait, which is unfortunate,” said the AFL-CIO’s Drake. “They just take way too long.”

“In the first three months of 2013, four trade unionists were killed. Since 2007, there have been at least 64 documented assassinations of trade unionists. In 2012 alone, we have seen at least 6 such assassinations. Additionally, there have been numerous acts of attempted murder, torture, kidnappings, break-ins and death threats, which have created a culture of fear and violence where the exercise of trade union rights becomes impossible.”

Carol Pier, the acting deputy undersecretary of the US Labor Department’s Bureau of International Labor Affairs, wrote a blog post celebrating the Enforcement Plan with Guatemala. Almost adding insult to injury, it was titled For Guatemalan Workers, a Ray of Hope. However, Pier did deservedly offer praise to the Guatemalan workers her staff met on a fact finding mission, “who made an enormous leap of faith by taking a chance” on this process, “hoping that just maybe it could make a real difference in their lives and the lives of their families.” She also recognized their “courage” in light of the fact that it was possible, if not very likely, that they would suffer retribution for their actions by their employers. Unfortunately, Pier failed to recognize Washington’s complicity in the dangers these courageous Guatemalans face as a result of politicians and trade negotiators ignoring a barrage of ongoing concerns and criticisms regarding CAFTA’s inefficient labor protections.

However, Gabriel Zelada, director of the Guatemalan organization CEADEL, which co-wrote the report on Alianza, doesn’t share Pier’s optimism.

“There is no political willingness to meet the commitments agreed in the CAFTA framework,” said Zelada, who has been the recipient of death threats for his work. “It seems the [Guatemalan] government believes it is purely being pressured and the arbitration panel will not get involved nor will there be any economic sanctions imposed on Guatemala.”

The facts suggest Zelada is right. On October 22, 2013, the AFL-CIO and Guatemalan trade unions sent a letter to the US Department of Labor, the U.S. Trade Representative and the Guatemalan Ministers of Labor and Economy that the Enforcement Plan failed to produce tangible results and action by the Guatemalan government. The letter called for the case to go to the arbitration panel. Instead, Washington decided to give Guatemala another six months to make progress.

“A Ray of Hope” for Worker-Friendly Future Trade Agreements?

In one way, free trade agreements since CAFTA have strengthened labor rights, at least on paper. Free trade agreements with Peru, Colombia, Panama and Korea allow for trade sanctions for labor violations. For example, if there are labor violations in any of these countries, say in the textiles and apparel sector, and the government fails to rectify the situation, tariffs could be raised on that sector, Drake said. This is an improvement from CAFTA where the maximum penalty is a fine, which violators essentially pay themselves because the money goes into a fund supposedly to fix the problems for which they were fined, although questions remain whether Washington would exercise the sanctions option expeditiously.

These more recent trade agreements also require the partner countries to ensure that their labor laws are consistent with international labor rights expressed under the International Labor Organization’s Labor Declaration on Fundamental Principles and Rights at Work. But there is still more that needs to be done.

“These free trade agreements as currently implemented almost solely benefit multinational corporations,” Drake said. “Instead, they should be for the benefit of the countries in the agreement and the point of them should be to raise the standard of living for workers.”

Raising the standard of living for workers would require stronger, clearer language in these trade agreements regarding what is expected from countries regarding labor rights. Drake also suggested that choosing ILO conventions rather than declarations would provide clearer guidance for when governments are or are not in compliance – and stricter timelines for moving dispute cases ahead. In addition, holding corporations accountable for the global supply chain also could complement stricter government accountability.

“Corporations have rights under free trade agreements, but no responsibilities contingent upon labor, environmental, health and safety standards,” Drake said.

Moving forward, the Obama administration is pursuing a new free trade agreement aggressively, the Trans-Pacific Partnership, a deal that would include Canada and 12 Asian and Latin American nations. One concern is that the agreement would facilitate outsourcing of more jobs given the cheap labor markets the deal would provide.

“The minimum wage in Vietnam is 28 cents an hour, and workers there face even greater obstacles to organizing than in Latin America,” said Arthur Stamoulis, executive director of Citizens Trade Campaign. “Working people throughout the Americas should absolutely expect severe job losses and a downward pressure on wages if the Trans-Pacific Partnership is enacted. They call it the global race to the bottom for a reason.”

Unfortunately, though not surprisingly, the process of negotiating trade agreements and drafting the texts continues to be secretive and dominated by business interests. Regarding the potentially forthcoming TPP and the prospect of significant improvements to the inadequate labor standards in previous free trade agreements, the AFL-CIO’s Drake said, “We don’t have confidence that there are going to be meaningful improvements for workers or that it’s going to be something we support.” However, she said that the AFL-CIO hasn’t abandoned all hope of being surprised.

In the meantime, workers such as Juana will continue to toil away six to seven days a week in a sweatshop for paltry wages, suffering abusive conditions and making just enough to barely scrape by, while the CEOs of companies such as JCPenney, Walmart and Macy’s – who profit from her exploitation – rake in millions of dollars. Until free trade agreements are rewritten to ensure that labor rights and human rights are prioritized over corporate profits and actually create a level playing field with regard to worker rights, then we can expect nothing to change.

“These countries are in competition with each other over who can provide the cheapest wages, and these companies are laughing all the way to the bank,” said Barbara Briggs, assistant director of Institute for Global Labour and Human Rights.